ClearSky Business has published a summary of pros and cons, for all of the most popular business structures; from sole trader to Limited Liability Partnership (LLP).

Selecting the right legal structure is one of the most important steps in a company’s formation process. This decision will affect future tax implications and the owner’s personal liability for debt.

ClearSky Business, a leading provider of accountancy, tax, payroll and HR services, has published a brand new ‘how to guide’ for helping entrepreneurs choose the right structure for their business.

Selecting the right legal structure is one of the most important steps in a company’s formation process. This decision will affect future tax implications and the owner’s personal liability for any debt. Business structures also influence the ability to raise funds and the amount of time spent on administration.

Fortunately for small business owners, help is at hand.

ClearSky Business has published a summary of pros and cons, for all of the most popular business structures; from sole trader to Limited Liability Partnership (LLP).

This popular status for budding entrepreneurs offers a simple and affordable set up. All the profits, after tax, belong to the trader, but they are also fully liable for any business debts.

Sole traders also tend to have less credibility than other business structures, with many choosing to form a Limited company once their venture begins to enjoy success.

Partnership

Partnerships involve two or more people working together to build a business. This requires a binding agreement between each party to ensure the profits are divided in the right way.

Before entering into a business partnership, remember that each partner remains personally liable for any business debts, even those incurred by the other party.

Limited company

The primary benefit of a Limited company is that it creates a barrier between the owner’s personal and business finances, helping to minimise any risk.

As the director of a Limited company, you can also expect a lot more administrative duties – registering with Companies House is just the start.

Limited Liability Partnership (LLP)

The simplest way to describe an LLP is a hybrid of a Limited company and partnership.

Like a partnership, a robust and legally binding agreement must be created which outlines how profits are divided.

Professional services providers such as law firms tend to favour this structure, since its inception in the UK.

For Derek Kelly, from ClearSky Business, it is important to remember that a company’s legal structure can be changed, however it’s better to get it right first time with the help of a qualified small business advisor.

He said: “The structure of your business venture is not set in stone. As your business grows, you have the ability to change it.

“But in order to make the right decision and maximise your investment it is important to have an idea of all of the options available to you. Here at Clearsky Business, an expert small business advisor can provide all of the information you need, in a simple, unbiased manner.”

ClearSky Business provides expert accountancy, tax, payroll and HR advice to small businesses and start-ups. For more information regarding business structures and company formations, visit http://www.clearskybusiness.co.uk.